General Motors announced an alliance Tuesday with Microsoft on its Cruise autonomous driving venture, combining forces to challenge Tesla and others in an electric car market expected to rev with Joe Biden’s environment-friendly administration in the White House.
The companies have established “a long-term strategic relationship,” and Microsoft will join GM, Honda and institutional investors in a new $2 billion equity investment round, GM and its Cruise subsidiary said in a press release.
“This is a major shot across the bow from Microsoft to Tesla and Waymo and other EV (electric vehicle) autonomous players that Redmond is on its way,” said Wedbush analyst Dan Ives.
“There is an arms race in the EV world and this is the latest collaborative deal with many more on there way, speaking to this trillion dollar market over the next decade.”
Ives and others think Apple is poised to begin putting its technology to work in self-driving, electric cars although the iPhone maker has remained mum on the subject.
Microsoft Azure is a powerhouse in the cloud computing market, so synching GM electric vehicles with Azure computing and artificial intelligence capabilities promises a boon for the car maker, Ives reasoned.
Microsoft also will provide hardware and software engineering support to GM as part of the alliance, which values Cruise at some $30 billion.
“Our mission to bring safer, better, and more affordable transportation to everyone isn’t just a tech race — it’s also a trust race,” Cruise chief executive Dan Ammann said.
“Microsoft, as the gold standard in the trustworthy democratization of technology, will be a force multiplier for us as we commercialize our fleet of self-driving, all-electric, shared vehicles.”
Microsoft CEO Satya Nadella said the venture will help GM and Cruise to “scale and make autonomous transportation mainstream.”
Last week, GM announced plans to build a fleet of new electric vans.
The partnership comes on the heels of a series of GM announcements to reposition the Detroit giant to compete with Tesla and other newer players.
“It makes a lot of sense,” said Edmunds executive director of insights Jessica Caldwell.
“Microsoft and General Motors, both massive, historical American companies, tackling a problem that companies around the world are working on.”
Companies such as GM are still trying to figure out what the self-driving car of the future looks like, Caldwell added.
Perhaps seats will face each other as in train cars, or there will be no need for front windows or driver seats.
Electric vehicle maker Rivian separately said it raised $2.65 billion in a new funding round valuing the Amazon-backed US company at $26.7 billion.
Investors included Amazon’s Climate Pledge Fund and Fidelity Management and Research, according to Rivian.
Amazon is set to launch its own electric delivery vans ordered from the startup.
Waymo, the autonomous car unit of Google-parent Alphabet, late last year opened its robo-taxi project to the general public in the US city of Phoenix, becoming the first widely available driverless ride service.
Early last year, Waymo raised $2.25 billion in its first external funding round to accelerate its deployment of autonomous cars and trucks.
Global Equities analyst Trip Chowdhry was skeptical of traditional car makers such as GM being able to recreate the mix of technology, manufacturing, logistics, and culture that has been a winning formula for electric car star Tesla.
“You cannot retrofit into the new world,” Chowdhry said while discussing the GM alliance with Microsoft.
Accelerating adoption of electric vehicles is expected to be “top of mind” in the Biden administration, being front-and-center in a framework of green initiatives, according to Ives.
“One of the core underpinnings of the Biden platform will be around pushing clean energy and zero-emissions vehicles with hopes of accelerating the deployment of electric vehicles and public charging outlets by 2030,” Ives said.